Justin spoke with Jonathan Metcalfe of Metcalfe Consulting. They talked about how he underwrites different asset classes and how he started his journey to the principle side of the commercial real estate business.
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Highlights
- Jonathan’s background – 1:00
- More services for the clients – 3:20
- The journey to the principle side – 6:19
- Looking at industrial deals – 11:42
- The multifamily space – 22:47
- Having both sides very solid – 38:01
- The best place to reach out Jonathan – 39:51
Episode Resources
Connect with Jonathan Metcalfe
Connect with Justin Smith
- https://smithcre.com/
- https://www.lee-associates.com/
- jbsmith@leeirvine.com
- https://www.linkedin.com/in/justinbsmith
Justin Smith
Johnny Metcalf, thank you for joining us today.
Jonathan Metcalfe
Thank you. Good to be on the podcast.
Justin Smith
If we’re talking about your background, where are you now and where did you come from? Because you were at a the HFF days if I’m not mistaken.
Jonathan Metcalfe
Correct. So, I started my career at HFF, in the capital markets division doing investment sales. I was an analyst there for about two or three years. I started as an intern and then moved up through the analyst program and got really good experience met really good people along the way. I saw a lot of volume and a lot of transactions. I was doing mostly commercial products, so it was office, industrial, retail was exposed to some multifamily but never really actually worked on any direct deals on the multifamily side. We saw everything from core kind of class A office product, core class A industrial, retail shopping centers, all the way down to secondary and tertiary kind of value add or optimistic land plays, strip centers. It just really kind of ran the gamut. It was predominantly focused on Southern California, but there were also a couple of deals in Arizona and other select markets that we worked on.
Justin Smith
I can only imagine learning as an analyst and having that wide variety and trying to now how to underwrite all of those. Obviously, you had like a team and people that you’re working with, but that’s a that does run the gamut.
Jonathan Metcalfe
It was it was intense. I’m not going to lie. It was long hours, a lot of hard work, but I would say that the people in the office kind of made it and that was the part that I enjoyed. I would claim to be it’s the most fun I never want to have again, but then again there’s a couple things in life that are like that.
Justin Smith
That is more fun than law school. No doubt about it. Everyone I’ve ever met that has gone through that had a pretty good experience. So it’s nothing like having a good crew to go through with.
Jonathan Metcalfe
Yeah, it was honestly great. And I still have a lot of good friends from HFF some are there, and some have moved on. So, it’s a good network and a lot of those people just being exposed to the clients at the firm. You kind of maintain some relationships with those groups. And it was just a good place to start my career.
Justin Smith
Then you were out before I turned into JLL.
Jonathan Metcalfe
Yes, I left 2018 or so and then I believe the merger happened in 2019. HFF was a pretty small firm, prior to them being acquired by JLL and I’m sure the dynamic changed a little bit with that merger.
Justin Smith
I have to imagine it was still helpful for the platform and still opened up a lot of opportunities.
Jonathan Metcalfe
Yeah, absolutely. I know that the people they’re excited about it and the capital markets division is relatively unchanged. I’m sure it just opened up more services for the clients of HFF and JLL as well.
Justin Smith
What caused you to depart from there? At some point in time, you started to figure out what you thought you needed next.
Jonathan Metcalfe
Yeah, so I left or kind of decided I wanted to leave and move on to the principal side. HFF was a good platform for that because you got good fundamental analyst experience and underwriting you saw equity and debt came together. But you were very detail oriented, just one transaction to the next. I kind of wanted to work on the principal side where you kind of would see more deals through. I always thought it was interesting to work on the principles that I kind of where I would see myself being long term. So, it was kind of interesting story, I started doing some moonlighting for a group where I share office space now called Wood Investments. I was working with them on a transaction that they were buying from HFF and developed a pretty good relationship with the group and ended up doing some extra analytical or underwriting work for other shopping centers they were buying. And that kind of consulting business turned into more and more business with other groups. I also had left to go work with a group called Lido Capital that was doing industrial acquisitions and development. I was working mostly full time with those guys, but also maintained some small consulting business with groups like Wood. There was a senior housing group that I was doing some work with and a few other smaller boutique brokerages where I was doing valuation work for them. Essentially, that kind of evolved into a little bit of a business and snowball that picked up more and more clients and word spread quickly, that I could do kind of third-party consulting or underwriting work. And I was also helping groups find some deals via just kind of leveraging the brokerage network and then also doing some direct outreach to ownership.
Justin Smith
God forbid people like working with him give you a lot of work to do and then you get so busy.
Jonathan Metcalfe
There was a period of time at HFF where I was very busy and working long hours and then I got to a point on my own where I was working more than I was working at HFF. But it was a different kind of feeling because I was working for myself. As opposed to working at a company, which was kind of nice.
Justin Smith
Now you get to guilt yourself into working longer hours. We need to build a team around you, Jonny. I feel like that’s the next frontier.
Jonathan Metcalfe
It’s something I’ve considered. I’m just trying to figure out the framework and how it could all come together. So, I’m just taking it one step at a time.
Justin Smith
No doubt and I love people’s journeys to the principal side. I feel like commercial real estate and everybody that goes in maybe not a 75% of them, it’s the journey to the principal side and everybody’s path takes a different winding road. I love it because everybody’s of a common mind and always looking for opportunities and it makes it easier to collaborate with people. That’s where I would say that yours and my journey is connected and was looking at stuff like that. So that’s awesome.
Jonathan Metcalfe
Absolutely. It is such a unique and entrepreneurial business and there’s so many different ways to make money or find a career in real estate and move on to the principal side. I mean you could be an architect and engineer or broker. You could work as an acquisitions guy, asset management, you can really just kind of run the gamut. It’s a lot of unique and diverse personalities that make working in the industry fun, for me at least.
Justin Smith
How would you say, analyst and underwriting work is different today than it was when you went through? Because that would be five years or six years?
Jonathan Metcalfe
I don’t think too much has changed. Fundamentally, I think it’s still the same concepts. You’re looking at a lot of the same metrics. I think people are still very Excel and Argus driven. Argus was converted to a new version of Argus. So maybe that’s one thing that’s changed. I think it’s the underwriting and the returns, I’d say over the past six years depending on what product type you’re chasing have changed. And people’s risk tolerance and return expectations have either compressed or widened during the time, since the time that I’ve started. For example, industrial returns have obviously compressed and then other assets like office and retail, I think returns abroad doubt or the, there’s been more risk associated, so you should get a higher return. So, it’s just kind of interesting to see all that come together.
Justin Smith
Yeah, you know, it was funny I concept I hadn’t really thought too much about as people pour into industrial is the concept of equilibrium as capital is looking at risk adjusted returns in at some point in time, all the capital and new industrial that’s new capital some of it will eventually start flowing elsewhere as the as returns get compressed. So, I feel like that is interesting to see with office going in a different direction and just with different asset classes of when is that and it’s not a specific point in time. It’s a fluid environment. So, it’s always changing and everyone’s always relocating. And so, it has been interesting to live that in the industrial front.
Jonathan Metcalfe
Totally, I think industrial in Southern California, it’s just swelled tremendously because you got a lot of demand from tenants and occupiers and end users. Then also you’ve got a lot of institutional capital swelling it pouring into the space. So that says making prices inflate tremendously everyone’s kind of pulling out or readjusting from retail to an office and into industrial and apartments. So, it is interesting to see.
Justin Smith
Yeah, and the past year where for industrial wherever you’ve been looking or what have you been underwriting?
Jonathan Metcalfe
You know, I’m pretty active in Texas. They own property in all four major markets. They’re active in Dallas, Austin, San Antonio, and Houston. Recently started to look a little bit at other kind of more tertiary markets in Texas near the border. Maybe poked around a little bit and some of the mountain states like Salt Lake and Boise to an extent and then Southern California.
Justin Smith
I’ve been looking at a deal in East Texas and I bet you didn’t know a whole lot about East Texas until you and I started talking like most Southern California folks. So, it sure is interesting to explore the next frontier if you are used to looking in Texas and then you start looking for yield or more product or less competition. How far out can you go and still feel comfortable with the risks associated?
Jonathan Metcalfe
Sure. So East Texas, is that different than Houston?
Justin Smith
Well, it depends on who you ask but yeah. I think that’s four hours southeast Dallas Fort Worth. This would just be one to two hours directly east towards Shreveport, Louisiana. There’s a couple of cities of 100,000 people that are in that market that make up East Texas.
Jonathan Metcalfe
So, it’s along the 10.
Justin Smith
Good question. I don’t know but I would tell you that that 10 if I were guessing is two hours south and is what goes through Houston. And so, I think it’s two hours in either direction from Houston or Dallas. In the past, maybe a year or so that you’ve been looking at industrial deals, what’s changed in terms of risk, return, IRR and cap rates? What do you see there? And rent growth? It seems like it’s become challenging on a couple different fronts.
Jonathan Metcalfe
Yeah, I mean, people are willing to stomach really low yields because rents have increased so dramatically. I think a lot of groups, if there’s any sort of near-term rollover or near-term role groups are just pricing through that knowing that the rents are going to increase 10, 15, 20 or 25% when they get the opportunity to reset that to market. From a development standpoint, I think groups are underwriting tremendous rent growth and trending to a return on costs that keeps getting lower and lower and lower. Everyone’s kind of got their own methodology on how they do things that kind of depending on where your capital comes from. But it’s just gotten aggressive because cap rates keep getting lower, lower and lower and there is still lack of available land. And of course, vacancies at all time low right now as well. So that’s really just driving all the returns are compressing is the short answer.
Justin Smith
It’s not as if this demand is imaginary. They are leasing, there’s a line out the door of people looking for space. It’s interesting to see both of those happen and then think within a 10-year horizon and start making assumptions for 10 years. We all enjoy the imagination that’s necessary to recognize nobody can guess correctly for 10 years. You’re making your best estimates and assumptions as much as you can at the time that you make them.
Jonathan Metcalfe
Totally. I mean, it’s hard to predict far much more than 24 months. I think he could probably get one year correct. You can budget for that or account for that but it’s hard to predict as far out in the future. I don’t think anyone could have seen what was coming with COVID or all the demand that would stem from COVID.
Justin Smith
So, when you look at all these models for five-year rent growth prediction for different markets around the country and specifically Southern California, and you see figures that are like 25 to 35% over the next five years. That would tell you five to 6% annually on average and if it’s cumulative. Is that what you have been underwriting?
Jonathan Metcalfe
It’s not what we have an underwriting. Depends on kind of what the profile is, I mean maybe there’s a year or two of it. With industrial, you’re able to get into the dirt a little more quickly and the development cycles a lot shorter than some other asset classes. Which I think also makes it more attractive for capital. So maybe there’s a year of fibers that rank growth, but a lot of the groups that I’m working with are more private capital or they’re less institutional have to put their own skin in the game. So if you make an error on over projecting rent growth, it can really come back to bite you.
Justin Smith
Yeah. That’s where I feel like, what you’re used to underwriting and what you underwrite now is, does that change? The e-commerce, it’s changed a lot of people’s thought process, but some things stay the same. Or it’s hard to make some of those changes. Now, I have a small brain so industrials all I think about it but you have a broad spectrum. So you got to tell me, the retail world what’s the lay of the land these days?
Jonathan Metcalfe
People would say it’s all doom and gloom. But I think it’s really asset driven and asset specific.
Justin Smith
Just to stop it for a quick second Jonny, the context we have is grant and I are working on an exchange where we’re in the single tenant, triple net lease space for a family and looking at absolute net, 10 years minimum, and six cap or greater in the Sunbelt, the Midwest and Mountain region. And it’s been interesting to run that program in dollar ranges from two to 15 million and see what kind of product is available out there. I wouldn’t say there’s a ton of it that fits that perfectly but it’s amazing, the single tenant triple net lease space, just how much activity and how much velocity. I feel like it’s having its own moment. I’m curious how that fits with maybe what you’re just about to say of what the retail market looks like. I imagine you also see like shopping centers and multi-tenant and product that’s different, because that’s where you can have value add where a single tenant triple net long term lease is more of a coupon clipper.
Jonathan Metcalfe
Sure, I was just gonna say I think that’s asset and location driven. Sure, I think triple nets are probably at the top of the list of desirability, and pretty much all retail is triple net. But you know, your drive thru stores, your banks, those are definitely attractive and they’re at a lower price point. So, a lot of investors can participate in them. There’s a lot of them, you can look kind of across the country and there’s going to be one in every town. So, there’s a lot of opportunity and a lot of new development of those types of drive thru or triple net locations. And then the other things that are hot right now, I think in the retail space are obviously grocery stores. Those remained open during COVID, thankfully. The discount tenants are doing quite well right now, like a Ross, TJ Maxx or Burlington. Those guys are all doing well. You might have seen they’re growing in their industrial footprint. So anytime you see a retailer take down more space for industrial building, I think that’s generally a good side of the retail market. But of course, some of those malls or lifestyle centers and some strip centers in that sense are struggling. I do think that well located strip, just think about you drive home on your way from your work or the office or wherever you’re going from. There are kind of well-located functional strip centers, at least were around where I live, that are probably doing very well. But you know, there are ones that are dying on the vine and maybe we’ll get redeveloped at some point.
Justin Smith
Yeah, no doubt about it. I feel like we’re fortunate in the area that we live where a lot of that has done well or has been buoyed to some sense. What markets are you looking at when you’re working on potential acquisitions?
Jonathan Metcalfe
Sure. I’ve predominately been looking in Southern California. The group that I do some consulting for is active, the old shopping centers in Paris, Ontario, Upland and San Bernardino. They’ve recently been poking around in the mountain states, so call it Utah, Idaho, Montana, and Colorado. I think that’s also kind of Lay on COVID and people relocating to more desirable places to live where they can get cheaper housing, better quality of living, and there are more retailers expanding up there. So, they’re able to go into areas like that and bring tenants with them and find good centers. They will locate centers and bring more growth to them by returning a lot of the spaces.
Justin Smith
Yeah, and so let’s compare those returns to how you underwrite for industrial? I got to imagine, higher caps but the value adds probably a different component.
Jonathan Metcalfe
Industrial is probably a three to a five cap at best and a lot of the retail stuff that I’m looking at in Southern California is a five and a half to seven. Seven would be pretty juicy but a lot of the stuff in the other states is six and a half to eight even with some grocery anchored stuff. So, the returns are obviously a much higher yield, which is attractive for a lot more people. And there’s a little more spread to if you’re able to break up a shopping center and personalize it. Buy and sell off the pads to Justin at four and five caps, and you bought the whole chunk Center at an eight. So, there’s opportunity there to make arbitrage on those deals.
Justin Smith
Why you have to give me the low capital Jonny?
Jonathan Metcalfe
Brand new 20-year lease set and forget it.
Justin Smith
It’s amazing, the different opportunities there are there between like the ground lease and between the grocery store and between the pad sites. And with the tenant base where if you have a lot of these, you can have synergies with tenants that you can bring to multiple projects. I feel like that’s a wonderful part of it that most people aren’t aware of that aren’t in that space.
Jonathan Metcalfe
Yes, there’s certainly a lot more moving pieces and it’s a little more intricate than the industrial space, just with uses and restrictions and tenant mix and the way that shopping center flows and good spacers bad space. It is complex.
Grant Labounty
Briefly about shopping centers or shopping malls, I should say. Do you see any confidence coming back there in the next two years? Or do you think that could possibly be a dead asset?
Jonathan Metcalfe
Yeah, I think it’s going to depend on the Mall. I think you’re seeing a lot of the BC malls get redeveloped either into housing or industrial. But I still think that core mall that is well located kind of regional centers will be fine. They might evolve or change a little bit in the way that they’re laid out. But I don’t know, that’s just my opinion. You might see some more houses pop up on some excess land, or you might see some of them change in layout or design. But I see people still want to go somewhere, at least I do. Go touch, feel and have entertainment. So, I think there is a need for that.
Justin Smith
Grant’s entertainment days are at an all-time high right now, I would say he is one of the main users of these types of places.
Jonathan Metcalfe
That’s good. Good for him.
Justin Smith
Then Jonny, there’s multi family. That’s a space that you’re also experienced in and have an interest in? I’m not sure if that’s from working with other groups or more of the quests to further into the principal side of the business set. How are you looking at multifamily these days?
Jonathan Metcalfe
I’m also looking for land on the development side for multifamily for a client of mine, and then I’ve kind of ventured into the space just because it is a lower price point. I’ve actually got a small project in Costa Mesa under contract that I’m trying to raise some capital around and it’s my first time doing it, so we’ll see how it goes. But I do think that there’s an opportunity in that space and it’s an easier kind of avenue to pursue because a lot of people understand that there’s a lot of demand for it and pretty much every market across the country. It’s obviously a hot space and institutional capital is attracted to it. Private capital is attracted to it. It is just something that is interesting to me. So, we’ll see what happens with this property in Costa Mesa and always looking for more entitlement or multifamily development plays.
Justin Smith
Yeah, probably the older vintage where there’s more room to renovate it too, I would imagine. Just think of like 60s and 70s construction, a lot of the base and coastal bases and a lot of other areas.
Jonathan Metcalfe
Totally. It’s interesting in Orange County and a lot of areas in Southern California are just experiencing, there’s a lot of people moving away from it which presents an opportunity to go buy apartments and other markets too. But there’s still tremendous growth and shortage of housing in California. So, we see the demand for it.
Justin Smith
And rent growth has to have popped in multifamily in Orange County over this past two years. I know it has for single family for rent. I would imagine it has in apartments as well.
Jonathan Metcalfe
Totally, totally. I don’t know the exact figures for it but it’s a little more suburban and people came down and get more space. So yeah, I imagine it’s strong. I know that COVID did hit a little bit of a pause on the apartment side because people were moving other places and the eviction laws and moratorium. So, there’s a little uncertainty, but I think it’ll come back stronger as we hopefully move out of this pandemic.
Justin Smith
There’s Jonny running right into the uncertainty. It is interesting though, to think does that really change the thesis. Or how much does it change the thesis or the attractiveness of those types of properties? And I feel like especially with the ones that are four to 10 units, or four to 20 units, or anywhere in that size range, I still feel like those are all too attractive for people that are just venturing out on the principal side.
Jonathan Metcalfe
Totally, totally. I would even compare them to in a way that they’re accessible to a lot of investors. So similar to a triple net asset there might be at a similar price point, but there might be a little more probably is more upside and returns by doing value add strategies and renovating and repositioning property.
Justin Smith
For people that are willing to put in the elbow grease. Put work into to reposition. It was interesting, you had mentioned rezoning and the opportunity there and having that be a place that’s hard. It’s a high barrier to entry place to look for investments. I love it. That’s got to be creative and looking for opportunities out there and if you’re able to find talented people aren’t put the right team together, there is opportunity there. So, I’m curious how you look at that.
Jonathan Metcalfe
Yeah, I mean, I’m always looking for some opportunity where you could take a piece of land and rezone it to a higher and better use. It is challenging. I don’t have the necessarily the experience to do that but there are people that are really skilled and entitlement and design and getting through the city politically and all that. All is entailed with that. But I’ve just witnessed a couple of transactions recently, where people have bought property for x and then you know, upon rezoning it, it’s worth three or four or 5x. And the cost that they had to do were entitle the property and all the design aspects and get it through the city. So, it is interesting, there’s a lot of risk that’s associated with it because you get neighbors, or you get protesting from residents and things that just come up. People come out of the woodwork to challenge your project.
Justin Smith
Making new friends.
Jonathan Metcalfe
That’s right. It’s something I’ve been exploring a little bit and have a little bit of experience in.
Justin Smith
You get to forego the construction loan aspect of it right. And then your ability to see the opportunity. That’s where I would imagine you would excel where 90% of us will be able to see it and then understand where it fits into the greater market of other property types. I feel like that’s where you can bring your expertise to bear and have the vision to go after creating something that’s not there that. People mostly would lack imagination for.
Jonathan Metcalfe
Sure, I’m no expert but it’s been fun to kind of watch a couple of these deals go down. And going back to the point about how capitals swelling into industrial and apartments. That presents opportunity for tired retail or commercial sites to maybe go to an industrial or residential use.
Justin Smith
More industrial, I like it. I love it. That’s awesome. Talk about being able to have a couple different avenues, where you can collaborate with folks and look for opportunities.
Jonathan Metcalfe
Sure, something I’ve also done, and I mentioned it earlier but the way that I’ve been collaborating with folks over the past couple of years is by working with other brokers and working with other operators to kind of mentoring some younger professionals, even students and just providing some analytical work. And I’d be happy to do that for other people. It’s just been a good way to kind of build a bridge or build a relationship with somebody and kind of kick the tires on some deals and it’s something I enjoy doing. So, who knows where that all goes? I kind of do see a little need in the market. It’s a niche market but I do see a need for certain brokerages or smaller private guys to have kind of an outsourced group that would be available to provide underwriting or just get in the weeds on something. And that’s something I’d be happy to work with people on.
Justin Smith
I could see the need. It’s when I think of what I see in my office and what I know of other people in their offices, very few can do it on their own. Many have opportunities that they see, or that are within range. And you can’t just pick that up and learn it. I feel like that’s a huge need that is generally unfulfilled in the marketplace. So, I’m happy to introduce you and I could see in our office at a minimum, but just across the company that’s been super helpful.
Jonathan Metcalfe
That’d be awesome. That’d be great.
Justin Smith
Contemplate where can you suggest for people like Gant. Grant is in year two on brokerage and he’s learning these types of things. Where would you send people like Grant to pick up some of these skills if they’re so inclined to put in the time and the effort? Other than working as an analyst.
Grant Labounty
Jonny, do you have a day camp that you can take me through?
Justin Smith
I’m going to drop Grant off on my way to work.
Jonathan Metcalfe
Come on by, the door’s always open. That’s funny. There are resources online and other ways that you can get involved. Read Brokerage OM or just kind of get in the flow on some of the deals that are being marketed widely from the larger firms that gives ways you can kind of pick up on it, learn something new. I’d even advise that groups like ULI or NAIOP are good places to go just to get acquainted with other people. I know it’s been helpful for me in the past because you meet a lot of great people. There’s educational programs too. Even Universities, I think UCI offers a class and other colleges offer training in that regard. But there’s resources out there if you look for them.
Grant Labounty
If someone wants to hire you, how much do you charge for just underwriting one deal?
Jonathan Metcalfe
$1 million. No, it kind of varies. It depends based on what the need is and the niche and all that stuff. So, it really just kind of depends on the case by case.
Justin Smith
As an example, Grant, the first time I had a need to for someone like Jonny but before I knew him, it was underwriting selling office condos and that was a great way to short circuit in my knowledge of our guests to think through, how are we going to underwrite buying an office building and selling office condos. That was a great first example of like, Okay, this is over my modeling paygrade, who do I know that can help conceive of this project and help us? I know what the market is, and I know what tenants want, and I know what TI packages are. But that was an interesting area where it just it was a non-starter for me mentally to have the resources and the skill set to put together a model for that. You could imagine that is different than then a few assets portfolio is different from an office building with multi tenants and so I can see why it’s such a wide variety of needs that you might find out there for people that need help.
Jonathan Metcalfe
Totally, they’re all a little different. But it all kind of comes down to a cash flow at the end of the day. So, they’re all just kind of unique little niches or different languages, but it’s all kind of similar.
Justin Smith
I had done some of this August training and I think the first three of them I left just being exposed and aware, but definitely not capable. And it was one of those like two- or three-day boot camps. And there’s no way you can expect to pick it up in two or three days, like a crash course. But it was at least awareness. Then I took one at UCLA that was Tuesday night driving up to West LA. I think it was a 10-week program, a three- or four-hour session each time. Then I came out of that with like, I could never forget it if I tried to and not in a bad way. Not like nightmares and cold sweats but just like you spent so much time and that pales in comparison to being an analyst for a couple of years before a broker and not having no access to that analyst experience. That was the best thing I could have had outside of the M read program and that was kind of next best for underwriting and modeling and really like having taken the opportunity to make the time and really focus on it until you really like a drill down and knew what you’re doing.
Jonathan Metcalfe
Yeah, I know a few people that have gone through that program too. I think they’d say the same thing. So that’s another good resource.
Justin Smith
That may be in your future Grant. I’d say wrapping up Jonny because we go through time pretty fast together. People starting out on the principal side, anything you would recommend or suggest? That’s got to be the hardest for people.
Jonathan Metcalfe
I don’t know. I would just put yourself out there and kind of see what happens. Don’t be afraid to ask for help or leverage your network. Don’t be afraid to ask questions is what I would say. Yeah, I’m working on it. So, we’ll see what happens. Who knows if they can get this coastal basin thing closed but I’ll let you guys know if I do.
Justin Smith
The one I found helpful was Gene Trowbridge is an attorney that puts syndications together and has written a book, It’s a Whole New Business. I had found him doing CCIM, 12 years ago or 15 years ago and that was like a manual for putting syndications together. At first for me, it just scared me out of it because it just opens your eyes to all the different things you need to understand before you’re investing other people’s money alongside your own. That was not a program, it doesn’t leave us like able to put a deal together per se, but it just was a great like eye opener of like, what are the things you have to have in mind or have thought through before you start walking the path?
Jonathan Metcalfe
What was the name of that book?
Justin Smith
It’s a Whole New Business, it’s by an attorney, Gene Trowbridge. So, he is a syndication attorney. We get one under contract and we raise the money and we’re ready to move forward. Who do we call next? We would call our syndication attorney that would help us with private placement memorandum and just help you think through the operating agreement and a lot of the other things you would need to have in place to know what happens if the million different things you have to imagine or have protected for everybody in one of these ventures.
Jonathan Metcalfe
So, what other advice would you provide?
Justin Smith
Yeah, that’s a great one. It’s funny, I did do some trial by fire of like finding a project and trying to tie it up and raise the money for it. One of my experiences there was, what was more difficult finding the friends and family people to pitch in with you on it or convincing the bank right that you have the chops, or the expertise to shepherd that asset through successful in that you’re someone that’s bankable or credit worthy. And so that was an interesting, and what I found was, they were both challenging at that time, right, that was maybe six or seven years ago for me and in the economy and in the market. And so that goes to back to what you were saying about starting out and putting yourself out there. I wouldn’t have learned that without having read that book without having to go into the program and without having just said, you know what you got to start putting one foot in front of the other. And so that helped me really understand how important it is to have both of those sides be very solid. It also helped me understand just in the future, how do I position the experience that I have as an operator? Because experience I have as a broker and as that that I have from other investments that are smaller steppingstone investments and then how to package them up so that you can help people understand why you’re the right fit for that investment and why they can have confidence and rely on believe in you.
Jonathan Metcalfe
That is good advice. How To summarize and package all of your experience and articulate it out succinctly to get the deal done.
Justin Smith
I thought raising the money was the hardest part at that point in time. And then once you’ve got the bank involved, then I think that helps you really size up what kind of opportunities you’re going after. And what I missed and didn’t have at the time that you know I would feel much more confident about now is at the time, I never would have contemplated like co-GP or partnering with someone else who already has that experience. I think I felt at the time it was there wasn’t enough spread in there are yield to bring on someone which in hindsight there totally was. And then I didn’t know at the time who to bring in where I feel like now, I do. I was afraid to bring in a partner that would be like an equal partner with me on a deal and that’s something where had I put myself out there on that part a little bit more networked a little more with that goal in mind. I think I definitely could have like a broad closed on that deal and brought that investment to life. I wouldn’t have known without just getting out there and getting in the mix on it. People want to reach out to you for opportunity or to talk about a property or underwriting, how do they find you? What’s the best place you’d like people to reach out to you?
Jonathan Metcalfe
I’m always available in cell phone or email.
Justin Smith
We’ll just put it in the show notes. And then so anyone listening can just see at the end of the episode and then go from there.
Jonathan Metcalfe
It’s my full name Jonathanjmetcalf@gmail.com and my cell phones 949-244-9988.
Justin Smith
And that’s Johnny, Jonny.
Jonathan Metcalfe
Email is Jonathan, but yes, Jonathan J. Metcalf all one word.
Justin Smith
Cool, Jonny, I appreciate you making yourself available and it’s fun to chat through stuff with.
Jonathan Metcalfe
Absolutely. Appreciate it Justin and Grant as well.
Justin Smith
You’ll be seeing Grant at 8:30 tomorrow morning.
Jonathan Metcalfe
Alright. Well have a good one guys.
Justin Smith
Yep. Talk to you later. Bye
